Series 79 practice questioneasySqueeze-Out Mergers and Appraisal Rights
A controlling shareholder in a Delaware corporation executes a short-form merger to acquire the remaining 5% minority interest. Which of the following statements is TRUE regarding the rights of minority shareholders in this situation?
- AMinority shareholders have no recourse and must accept the merger price.
- BMinority shareholders are entitled to demand a judicial appraisal of their shares.✓ Correct answer
- CThe merger requires approval by a majority of the minority shareholders.
- DA tender offer must first be made to all minority shareholders.
Explanation
Why B — Minority shareholders are entitled to demand a judicial appraisal of their shares.
Under Delaware law, minority shareholders in a short-form merger have the right to seek a judicial appraisal of their shares if they believe the merger price is unfair. Option A is a trap because it ignores these statutory rights; option C and D misstate the procedural requirements.
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